Covid-19 wave in Malaysia threatens to prolong global chip shortage

The wave of Covid-19 cases in Malaysia, a crucial country in the semiconductor supply chain, has posed new challenges in the battle to overcome the industrial production problems that have spread across industries during the global chip shortage. On-site disruptions dampen hopes of relief in the second half of this year and threaten to prolong uncertainties over 2022.

The supply crisis in Malaysia, caused mainly by the lack of professionals, linked to measures to control the virus and combined with a strong increase in global demand, represents a new problem for the automobile industry. In the first half of this year, the shortage was mainly due to companies that underestimated the pace of economic recovery and did not order enough parts.

Now they are struggling to get the parts they need because covid-19 outbreaks are hampering production.

“We think the supply is resolved and suddenly there’s a problem somewhere else,” says Ravi Vijayaraghavan, partner and semiconductor specialist at consulting firm Bain & Company. Some of the world’s top car makers, such as Toyota, Ford, General Motors and Nissan, have reported big production cuts, mostly attributed to shortages of chips at Malaysian factories.

Ford suspended work for about a week at an F-150 plant in Kansas City, Missouri, and one in Fiesta in Cologne, Germany, because of a lack of parts.

Toyota, for its part, announced that it would reduce global production by about 40% in September.

General Motors said it expects to manufacture 100,000 fewer vehicles in North America in the second half of the year.

The problems in Malaysia are due to the worst Covid-19 wave in the country since the beginning of the pandemic. The nation of approximately 32 million people has recorded more than 1.6 million cases and nearly 15,000 deaths, with more than half this summer (in the Northern Hemisphere).